Andreas Antonopoulos discusses Bitcoin neutrality at the Bitcoin 2013 Conference on May 18, 2013, in San Jose, CA, hosted by the Bitcoin Foundation. For more information on donating or joining as a member, please visit www.bitcoinfoundation.org.

TRANSCRIPT

MAN #1: We welcome Andreas Antonopoulos who will talk on Bitcoin neutrality.

ANDREAS ANTONOPOULOS: All right. Thank you everyone. Halo, Buenos Aires. I am really excited to be here and yesterday I discovered once again why they called this the City that never sleeps. So, forgive the black shadow under my eye that’s because I participated in the festivities, a really awesome evening but – so I’m not going to do any slides and I’m not going to do podium.

I’m just going to walk around and talk about the topic that’s truly important to me which is about Bitcoin neutrality. And let me start first by saying that to me Bitcoin is not a currency and there are no coins. Bitcoin is a network and it’s a protocol.

And more importantly it’s an invention and distributed computing science that truly revolutionized distributed computing because it allowed for the first time to achieve consensus across decentralized network without a trusted third party. We haven’t even begun to understand the implications of that invention but it includes a lot more than just currency.

Currency is just the first app on the Bitcoin network and the fact that the Bitcoin, the Bitcoin technology, the Bitcoin invention and the Bitcoin currency all shared the same name is rather confusing because people think it’s all about the coins and the coins don’t really matter.

In fact we could completely fail this currency and they’ll be so surprised when the next morning we bootstrap another one because I think finally we killed Bitcoin what’s this thing, Bitcoin 2? Didn’t expect that one.

So I do want to talk a bit about the network and why it’s important, why it’s ground breaking and what the core principles are that make the Bitcoin network work. And why the currency has the characteristics it does that make it so popular among the early adopters that we see today.

So let me explain first of all what do I mean by Bitcoin neutrality. What is the key characteristic of Bitcoin? Is it doesn’t care who the sender is? It doesn’t care who the recipient is and it doesn’t care what the contents of the transaction is. It is a simple, layer three routing protocol that allows the transfer of abstract value from Point T to Point P.

Why is this an important principle? Because it is the same principle that underlies the internet and TCP/IP and what it does is it empowers the nodes at the end of the network instead of the network or the center itself. Effectively the network is a dumb pipe.

A mechanism for transmitting value from A to B without discrimination between sender, recipient or amount. This is important because it also shifts the center of innovation from regulated centralized permission based innovation as we had on all networks before the internet. It’s a renovation of the edges and most importantly innovation without permission.

Bitcoin is a protocol and the standard that I can connect you from anywhere in the world and I can inject messages directly into that standard without asking anybody’s permission. I can invent whole new applications and financial instruments that I can layer on top of the network and these can be completely independent to Bitcoin the currency. We’ve already seeing the first application being launched that layer on top of this protocol.

So the currency is just the beginning. This is our beta test. This is our e-mail application. Perhaps not even e-mail. We at the beginning of the equivalent where the internet was in 1991 and we have an application that’s good enough. It’s a currency, it works pretty well but that’s not the important thing.

The only thing I want to talk about briefly is about the path of adoption of Bitcoin. Let’s talk about my perspective on how Bitcoin will be adopted as a currency and what the implications of that adoption are and what pressures we will face as Bitcoin gets more widely adopted. So let me step down here.

So the first thing I think especially in North American audience is that there is this vast misunderstanding that Bitcoin will somehow grow linearly and explode from the center out, the center force being Silicon Valley. Yes, we are that thing (0:04:40).

So, if you think you can start solving the world’s problem with technology which is uniquely Californian attitude you think that we – this new thing, this new technology which is (0:04:51) and will get users and IPO the thing and then grow it outwards and that’s not how it’s going to happen. The reason it’s not going to happen that way is because I cannot answer the very simple question why is Bitcoin better than the US dollar?

And I can tell you right now it’s not and it won’t be for quite a long time and it doesn’t matter because there are 192 currencies in the world and Bitcoin doesn’t have to be better in the top currency. Right now Bitcoin is better than about 40 or 50 currencies in the world both in terms of market capitalization, relative utility, safety, volatility and value.

So what we’re going to see is adoption at the periphery and this adoption will not be linear, it won’t be smooth, it will be explosively volatile because what we will see is crisis triggering mass adoption in tiny, tiny regions around the world. And Argentina is one of the hotspots and that’s why I’m really excited to be here.

So if you (0:06:01) the currencies in the world then you have a 192 currencies, at the top is the US dollar. It’s the world reserve currency. There is only one world reserve currency and if you’re an American you got it pretty good. You can wire transfer pretty much anywhere in the world. The regulations allow you to do it. It’s smooth, it’s efficient, the banks generally don’t steal from you unless they’re stealing from the entire population.

You know you don’t get your bank account randomly shutdown, we got it good. And then there’s the Zimbabwean dollar right at the bottom, currently 193. This great photo of a stack of 100 trillion dollar notes, that’s 100 trillion Zimbabwean dollars each and the stack is this big that is being used to buy a cup of coffee.

So, in Zimbabwe the money is literally worth less than shit. Why? Because goat shit burns longer and can be used for cooking and heating whereas paper burns way too fast. So the caloric value of the actual paper – this money not only doesn’t have monetary value, its intrinsic value is literally less than shit. So why isn’t Bitcoin adopted widely in Zimbabwe?

There are many reasons. And so I want to talk about what the requirements are for broad scale adoption by individuals within a population in a country. Broadly speaking those are:

Marginal utility versus local currency. How good is Bitcoin compared to your local money? Right now I’d say it’s better than 40, 50 currencies in the world.

The second one is infrastructure. And when we speak about infrastructure in North America people think well, not everybody has smartphones. No dummy, not everyone has electricity forget smartphones. Electricity is a much more critical component. So in order to have broad Bitcoin adoption we need to do two things.

We need to be able to arrive at countries as the level of infrastructure technology increases and at the same time downtech Bitcoin to the point where it can be adopted with minimal infrastructure.

The number one use of solar panels in Africa today is to charge cellphones because the opportunity thus provided to an African villager with a cellphone that they can charge from solar panel is absolutely incredible. So can we get Bitcoin to work with SMS?

Can we get Bitcoin to work with paper wallets? Can we get Bitcoin to be represented by physical redeemable tokens for hand-to-hand transactions? We need to downtech Bitcoin to get it into those corners of the world where there is desperate need.

The third is fear. If I hold Bitcoin am I likely to be killed by my government? Not a problem in North America yet. North Korea, you will be executed for holding Bitcoin and that’s not a joke. And there are many other countries that will have that problem. Do I end up in jail? Do I end up beaten up? Do I end up being tortured because I’m holding Bitcoin? That’s a key cultural adoption requirement.

And the fourth one is neutrality. And there’s a different types of neutrality not just network neutrality, not just the ability to participate in the network regardless of who you are, who you’re sending to or how much you’re sending but also cultural, linguistic, religious neutrality.

So, if I am living in Israel is the currency compatible with my religion? Can I use it on the Sabbath? For example. If I live in a country that is under Islamic law is the banking system able to support this currency under Sharia banking rules? Can I use the currency in a right to left writing system, in a system of numbers that’s not Roman numerals?

Now the answer today is yes. For most of the basic applications of Bitcoin it is a cultural, religious neutral currency and that is a tremendous advantage because very few currencies actually achieve that.

But as we build new applications we must keep in the back of our mind that there is a vast world out there that has very different standards from language, cultural and religion and we have to be accommodating and be able to be neutral towards all of these cultures.

So those are the four prerequisites for adoption. And if you suddenly think about Bitcoin from this perspective the most important realization is that Bitcoin is not about us. I look around this room and I see a sea of white faces, most male, right? We have it good. Even in Argentina we have it good. We have banking systems, we have currencies.

In the US at the moment 18% of the population have insufficient or no access to banking facilities, that’s almost 60 million people mostly composed of immigrants and itinerant workers working for and, people in the deep south who have never had access to identification documents and the legal prerequisites and that’s in the richest country of the world. It goes down from there. So, there are countries where 75% of the adult have no access to banking facility.

If there are a billion people in the world who have access to banking that leaves six and a half million people. So Bitcoin is all about the other six and a half million, that is my passion.

How do we make it happen? We need to be able to introduce the currency in a way that allows easy adoption in a technologically depressed environment with minimal infrastructure. There are many ways to do that. One of the projects I’ve been involved in for example, is the use of paper wallets. And paper wallets allow you to encode the keys for transaction onto a piece of paper. This is very useful for cold storage.

But one of the things that became apparent almost immediately and ties in very nicely to Peter’s talk about what is money is that if you create paper wallets that can occasionally be checked against the Blockchain suddenly they acquire value. Suddenly they can be traded at face value just like normal paper currency.

We can’t do this, we can’t use physical tokens. When we think about this from a technologically advanced world we suddenly think what? There’ll be fraud, there will be double spending how could that possibly work? It has to be secured, it has to be perfect.

And the truth is no money is perfect and it doesn’t have to be perfect. One out of every hundred and fifty US dollar twenty bills in an American’s pocket is counterfeit. I’ve been passed counterfeit notes several times that are so good you can’t tell that they’re counterfeit. Do I care?

No, I don’t. Why? Because as long as the next person in line is willing to take that at face value and give me goods and services, it’s money. The point being that all you need is occasional security, the ability to create just enough security to make a viable currency.

And the more distressed an economy is, the more desperate the situation, the more likely the people in that country are willing to deal with good enough security and with good enough currency. Why? Because it’s better than their money which is worst than goat shit. So we have to reset our expectations about how we distribute Bitcoin around the world.

But I want to switch tracks a bit and talk about Bitcoin neutrality because the other aspect of this is understanding that within this network we can do a lot more than currency and as we try to do this the very basis of Bitcoin neutrality, the fact that it doesn’t care about the sender, the recipient or the value is the core principle is the biggest strength of this currency.

It allows the innovation of the edges and guess what, it’s going to be the first thing that is attacked because it was the first thing that was attacked on the internet. And at one point in time we had a perfectly peer-to-peer internet with completely decentralized systems and complete network neutrality. And what do we have today? Blacklists and whitelists and restricted IP addresses and limited network neutrality. We have to resist the exact same forces as they will occur in Bitcoin.

Recently in the Bitcoin space there have been some suggestions to introduce filtering and blacklisting in order to prevent Bitcoin theft. That is both the dumbest and most dangerous idea that has ever come across the Bitcoin environment. Why? Because it will be completely ineffective at stopping theft but it will be absolutely devastating to the currency. Let’s talk about this for a second.

The core principle of network neutrality as expressed in Bitcoin means that the only requirement in order to redeem a transaction is that I can verify the transaction script by providing the necessary input usually an elliptic cryptography key that allows me to unlock a specific value. That is the only requirement.

I can do this from anywhere in the world, no one can stop me and that is the essence of removing counterparty risk from the currency. It means that the only two participants in the transaction are the sender being willing to send the money and the recipient having the necessary token to unlock it. If you break that, if you break that you break Bitcoin.

Back in the 1700s there was a famous legal case in Scotland where a merchant marked some of the Scottish bills that they had and recorded the serial numbers. And when those bills were stolen and then reappear at the local bank the merchant went to the bank and demanded that they give him back the notes.

He said here I have proof that this money was stolen from me. That was a critical case because if you can make distinctions between one currency and another currency unit you break the cardinal rule of money which is fungibility that each currency unit is completely interchangeable and of equal value to every other currency units.

Fortunately, the Scottish merchant lost and in the court opinion they said well, it sounds like a good idea but it would destroy money and sorry you can’t do that. You can’t discriminate between one unit of currency versus another.

If we introduce blacklist or filtering into Bitcoin we will destroy fungibility and we will do it for a very cheap price because what we will get in return is absolutely nothing. We cannot stop that by creating blacklist because it’s so easy to remix money launder on Bitcoin, right? You would have to then provide auxiliary controls at all entry and exit points into and out of the Bitcoin network and then the slippery slope towards complete control begins.

Filtering within Bitcoin destroys fungibility. It means that in a transaction there are now three parties. The sender, the recipient and whoever manages the blacklist. It means that what was once an irrevocably redeemable transaction, meaning that it could be redeemed and no one can revoke your right to redeem that transaction is now a revocable, redeemable transaction and that breaks Bitcoin.

It also means that those blacklists are going to be managed by organizations – organizations that wouldn’t share our values. Organizations that don’t give a rats ass about consensus on the Blockchain. Organizations that will apply veto power over transactions.

And guess what, do you think HSBC’s money laundered Bitcoins will be blocked? Hell, no. Because the moment they’re added to the blacklist an army of lawyers will descend on whoever is managing the blacklist and now you’ve got another counterparty, the federal court and another counterparty the plaintiff. Now your transaction depends on six different parties. There goes fungibility.

There goes redeemability of the currency. There goes neutrality. Of course they won’t apply to HSBC, too big to fail. No, greenpeace, WikiLeaks, animal activist, dissenters, opposition to your government, their coins are going to get frozen. What you will do by introducing this control is hand political control back and put the levers of power right back into the center of the currency.

So already we have seen the first attempts to break Bitcoin neutrality. We must understand that that is the core principle that makes the Bitcoin network what it is. That is what allows us to compete against any state based cryptocurrency because at the end of the day the simple rule is this – a decentralized system delivers more value to each notes that any hierarchal centralized system can.

And so if you have the opportunity to run side by side a hierarchal centralized system and a decentralized system, the decentralized system always wins. So let’s resist the temptation to introduce centralization to Bitcoin and trust me there will be plenty of pressure. It will be done for the good of the people. It will be done for safety and security.

When the governments and regulators come to you and say for your own good we have come to fix Bitcoin. Your response should be fuck off, Bitcoin works fine. Bitcoin is the decentralized system by design and decentralization is not a fluke, it’s not a side effect. It is the core design principle that makes it work. We are not experiencing simply the decentralization of money. Bitcoin decentralizes the very separation of money and state.

It doesn’t disrupt national money, it disrupts nation states just like the internet is disrupting nation states because it decentralizes power. That is the most important aspect of the Bitcoin network and currency is just the first act.

It’s a really powerful app because it’s fueled by the engine of neutrality and it gives us this incredible power, decentralization of power and allows us to take away the levers of control. The levers of governments and central banks have used not to better our lives but to oppress people and exploit people and gain as much value out and exploit the economy as possible.

Hierarchal systems were designed to solve seventeenth century problems of scale. From representative government to central banking to all of the hierarchal pyramid-like systems around us were designed to solve the fact that in the seventeenth century you couldn’t get a message from one side of a continent to another and you couldn’t have a debate across millions of people and you couldn’t arrive a consensus and guess what, those problems no longer exist.

We solved communication scale with the internet. We solved discussion at scale with social media and now we have solved consensus of scale with a distributed asset ledger proof of work consensus system.

We don’t need the hierarchal systems anymore because they solved the problem that no longer exist, so goodbye to them. Because they can try and build state coin, an Argentina coin, a US fed coin and whatever they want and they can put right up next to Bitcoin and let’s see who innovates faster – the centralized system with controls or the one that can innovate without permission of the edge.

We will win every single one of those fights as long as we maintain the core principle, decentralization and neutrality across sender, recipient and transaction. Thank you.

MAN: Andreas.

ANDREAS ANTONOPOULOS: Can I take some questions?

MAN: Okay.

ANDREAS ANTONOPOULOS: All right. Question?

MAN #2: I can feel the (0:23:53) where you’re trying to essentially sway the legitimacy of a coin?

ANDREAS ANTONOPOULOS: So, I am a big fan of multi-sig capabilities and generally the flexibility of the transaction scripting language. To me the Blockchain is like the IP layer, the transaction scripting language is like the TCP layer that allows us to do fine-grained transmission control within the underlying essentially network layer protocol.

And then transactions allow you to voluntarily introduce counterparty risk or third parties and you may do this voluntarily because you want to put trust in a counterparty in order to add security to your systems. That is perfectly fine.

But because the person creating the transaction is the sender and the sender has the choices whether they want to or do not want to introduce counterparty risk. It’s a very big difference between that and control ceded to an authority that is not control by anyone and the (0:25:04) in a blacklist.

MAN #3: Could you say, tell me about responsibility that we have as the (0:25:16) and taking into account not only our needs but the needs of smaller countries and currencies, I mean…

ANDREAS ANTONOPOULOS: Yeah.

MAN #3: You once talked about this.

ANDREAS ANTONOPOULOS: So, to me the key argument for understanding that this is all about the other six and a half million has some important implications as to what kind of development you do, where you focus your attentions. The most important aspect of Bitcoin today for me is for remittances.

It is the most exploitative market in the world, it is the industry that most deserves to be disrupted out of business. And so, for me that is empowering for millions of people around the world right away and there is so much incentives to solve that problem. But in order for us to solve that problem as people who live in relatively wealthy countries and I think especially for the Americans among us but that also even here, you know, compare to Zambia we are rich.

And so the point is when we talk about microtransactions we need to calibrate our thinking to understand what that means to a Zambian farmer who makes four dollars a month, right? An American coming to Argentina has to make that calibration and an Argetinian going to Zambia has to make that calibration again. So, microtransaction in the context of the African subcontinent is in the order of tenth of a cent, hundredth of a cent on the US dollar, not dollars.

And that’s an important distinction and we have people in San Jose from India saying I love what you’re saying about microtransactions but what you’re calling a microtransaction in my country we called transaction. You need to take two orders of magnitudes further down.

So, understanding who our audience is. If we’re going to do developments here you have to understand that your audience is global from day one. You can’t develop a Bitcoin application and say I’m going to launch in Argentina and if it’s good I’m going to Latin America and then I’m going to go global. Day one you are global. So make sure you’re ready to be global by addressing the audience’s record.

MAN #4: Speaking Spanish.

MAN #1: The question is what’s the profit of using Bitcoin in Argentina in the context where he supposed money is trying to get out more than getting in.

ANDREAS ANTONOPOULOS: So, that’s a very good question. To me I see this as a matter of balancing currency flows, right? So what you have to do is find the right balance between say, a thousand migrant workers sending money home and one rich dude who is trying to get out of the currency sending a thousand times more money in the opposite direction.

Finding that right balance between the currency flows. Always what’s going to happen is you’re going to run out to Bitcoin if you do it one way. So that’s one of the key problems we haven’t cracked that. But essentially all you need to do is make a tiny pinprick in the dam and the money will flow through because behind that dam is 500 billion dollars of yearly transaction being exploited by companies like Western Union.

So, if you can make a tiny pinprick in that you’re biggest problem is a company doing remittances or doing capital flight is that your growth is going to go logarithmic, one, ten, a hunderd of thousand, ten thousand, ten million.

So, good luck handling that kind of growth. Most companies in the Bitcoin space can’t do that. It is a big problem we haven’t solve it. Trust me, you’ll know when we solve it. You’ll see it on the Bitcoin price.

MAN #5: A little one. What do you think about Juan Llanos?

ANDREAS ANTONOPOULOS: About what?

MAN #5: Juan Llanos (0:29:25)

ANDREAS ANTONOPOULOS: I don’t know. I didn’t hear those.

MAN #1: No, I think Andreas didn’t see Juan Llanos.

ANDREAS ANTONOPOULOS: Well, in either case I wouldn’t comment on another speaker’s presentation, okay. All right.

MAN #1: Yeah. I mean he didn’t see the presentation from Juan.

ANDREAS ANTONOPOULOS: Sorry.

MAN #6: Do you see the United States of America government using a service like (0:30:17) relation? Like, supposed that the US dollar is going to be – the USA allows you to pay your taxes in Bitcoin do you see the government using some system of relation requiring you to pay in those kinds on validated coins?

ANDREAS ANTONOPOULOS: Yeah, I would’ve put a (0:30:39). I think we are going to see that kind of – well, I am assuming that the entire Blockchain is being tracked and analyzed on a big databases already and has been since the inception. So any transaction you do, if you touch another transaction then that is being tracked. To me the answer is very simple: every single Bitcoin clients needs to include remixers on by default. No user choice on every transaction.

We made a major mistake of trying to retrofit the internet with Tor after the fact. This time we have a chance to build it from the foundation and we should do that absolutely. There are a couple of projects there Dark Wallet, CoinJoin, we need to do that, we need to make the default Bitcoin network a dark net.

Now they will do coin validation and I have no problem with that being done on a (0:31:30) level as long as the everyday user has the ability to do anonymization and remixing. But you have to resist it even there because if it’s legislative then that’s going to effectively nullify the opportunity for the United States to compete in this market. Bitcoin is like water and it will flow somewhere else, hopefully.

NICHOLAS: Hi, my name is Nicholas. You mentioned that decentralization is one of the greatest strength of a network and I agree with that. My question is as mining moves into large enterprises don’t you feel that this may bring some risks in terms of decisions of the network become more and more concentrated and fewer number of people?

ANDREAS ANTONOPOULOS: Well, there are two participants in the consensus system. There are miners and then there’s us, everyday users. You choose which Satoshi reference clients’ version you’re working on. So, if I’m working on 095 and in 096 core developer group introduces filtering and all of the miners say yes and all of the users say fuck that then we’re not going to 096 it’s as simple as that.

If all of the users stay on the old chain the miners can go do whatever they want. They’re going to be mining empty blocks. We have the power as users to choose. In every upgrade decision we are voting as part of the consensus system as to whether we accept the developers’ decision to introduce a new feature.

Also, mining has now concentrated to the point of reaching the level of Silicon A6. We squeeze out four, five, six orders of magnitude of efficiency from CPUs to A6 but we are now on a rail.

From now on it’s Moore’s law. The only way to improve it is to go from 28 to 26 to 20 to 14 nanometers and that’s what’s very predictable development phase and there are no more multiple orders of magnitudes other than Moore’s law doubling eight every eighteen months.

So, we’ve seen this very weird sudden increase in mining but that was an aberration of changing platforms and hardware. We’re done with that, that’s all done. So now it’s just Moore’s law which will lead less concentration.

MAN #1: Guys, we are running, we already run out of time.

ANDREAS ANTONOPOULOS: All right.

MAN #1: So, this is the last two questions. You too?

MAN #7: No.

MAN #1: Sorry, then times were already up and please Andreas (0:34:01)

MAN #8: Okay. Hi, I saw that – where you’re saying that at any given point of time you’d like to keep only three cryptocurrencies so obviously Bitcoin is one and would you mind sharing which are the other two that you’d keep?

ANDREAS ANTONOPOULOS: Which currencies?

MAN #8: Cryptocurrencies.

ANDREAS ANTONOPOULOS: Yes. So, I don’t believe there’s a future with one cryptocurrency, I don’t believe there’s a future with zero cryptocurrencies, I think the most likely future is a 180-some national currencies and about six cryptocurrencies probably developed in a parallel relationship. One currency will have 70–80% of the market then the other five will share the last 20% in diminishing shares. What those currencies are? I have no idea. I don’t think they’ve been invented yet.

What we see now is a development of old coins as laboratory and evolutionary system that is responding to the current needs or current perceived needs and those will change. For example, if we did see coin validation Darkcoin would be the first old coin I developed, right? So, we’re going to see the names and attitudes of the coins change to adapt to what is needed in the ecosystem at any time and I don’t think those cryptocurrencies have been invented yet.

MAN #1: So, please (0:35:16)

MAN #9: Yeah. So, the government usually has an agenda and they used very powerful words. For instance they said terrorism and you’re supposed to freeze. What answer do you have to the term money laundering that we could interpret as like trying to get the money in this case the retro (0:35:37) coins into a whitelist.

ANDREAS ANTONOPOULOS: Yes.

MAN #8: We could say it does laundering but I mean it doesn’t have to be that.

ANDREAS ANTONOPOULOS: I say no.

MAN #8: But when they say it it’s – you’re supposed to feel about so what is your response when it happens?

ANDREAS ANTONOPOULOS: I don’t feel bad I know who the criminals are. I know where they work they work on Wall Street. I have no question in my mind as to who is doing the money laundering, who is doing the theft, who is doing the extraction of value from (0:36:07) economy.

So, if a regulator comes to me and says to me that they need to adapt Bitcoin to stop money laundering I tell them walk six blocks down Broadway until you hit Wall Street and you will find your problem. They are the same guys who got away with stealing trillions of dollars and no one went to jail.

So, money laundering is unauthorized banking by non-regulated institutions and all they can do is scream and cry and complain and talk to the media but at the end of the day they can’t touch the protocol and its information. When money becomes a content type the only way to stop money flowing is to shutdown the entire internet. Good luck with that.

MAN #1: Thank you.

ANDREAS ANTONOPOULOS: Thank you. Thank you.

=======

Andreas M. Antonopoulos: The topic I want to talk about today is Bitcoin Neutrality. Bitcoin Neutrality, what is Bitcoin Neutrality mean? Neutrality in Bitcoin means being able to adopt Bitcoin in any culture, any language, any religion, any geography, but also any political or economic system.

So Bitcoin Neutrality is about making Bitcoin a standard that is independent of your desires and expectations. This isn't a libertarian currency any more than it's a communist currency. It's a currency and it can be applied to any political system whether it is the political system you like or not.

It's a neutral currency. So what is neutrality mean? Neutrality doesn't mean no principles. Neutrality is a principle in itself. And, in fact, what I'm here to talk to you about today is the neutrality is the most important principle in Bitcoin and most of the other great things derive from that.

If you want to really understand how neutrality will affect Bitcoin in the future, we need to look at what has happened with the Internet and TCP/IP in terms of neutrality. On the Internet, anyone can publish with the same voice that Time Warner and CBS and ABC and CNN have. So neutrality is about being able to balance things so that it doesn't matter who the sender is or the recipient is, how big the transaction is, what type of transaction it is, whether it's buying gold, camels or drugs. Neutrality means that the network will process your transaction and will charge you based on how big that transaction is into the blockchain.

Great, we all understand we have that principle today. What I want to talk about is how important that principle is, how fragile that principle is, and how quickly people are going to try to co-opt and pervert that principle. And we've traveled this journey already on the Internet.

We started out with a completely neutral IP protocol that allowed us to have that equality of voice across any channel and in comparison to any other website. And then the Internet got popular and the first thing that people started attacking was the concept of neutrality, right. Because if you're already at the top of the ladder, the first thing you do is pull up the ladder behind you.

You sure don't want the little people down there climbing it, too. Neutrality as a principle that's built into Bitcoin today, but it will only survive if it is vigorously defended. And there will be plenty opportunities to defend it because it will be attacked. So let's talk a bit about the specifics. What is neutrality? How it applies in different contexts? Let's talk about how neutrals you will be attacked. And then finally I'll wrap it up by talking about why neutrality is important if we want to see adoption of Bitcoin, rapid adoption of Bitcoin?

Again, the slides will be available as part of the video, so feel free to pick those up after the presentation. I'm not going to torment you with PowerPoint. So, first, neutrality. What does that mean? We tend to think of Bitcoin in the terms of our own personal experience. And as far as I can tell most of people here come from a first-world economy, probably this first-world economy. And they have a certain experience with currency and that experience is not normative. That is not the experience of the world. Everyone in this room uses the world's reserve currency. No one else gets to use the world's reserve currency, right.

So we need to understand that adoption of Bitcoin won't necessarily happen here. And my argument is, in fact, here is the last place where Bitcoin will broadly be adopted. And that's why neutrality is important because if you are living and breathing a first-world structured rule of law easily negotiated contractual obligations and resolutions for a justice system that actually works sometimes but certainly works better than most countries.

A country where cross-border transactions are handled in an regularly efficient way where you can move currency around and you can interact with the rest of the world Bitcoin may not be that big a deal for you. If you live within a 100 miles of the border between Kenya and Tanzania you regularly transact in four currencies: the Kenyan currency, the Tanzanian currency, the euro, and the U.S. dollar. You're used to not having a bank account, you're used to carrying sacks of money, you're used to having floating exchange rates, governments that prey on your currency and dilute it.

So your expectations are very different. My argument today is the neutrality boosts adoption because it allows everyone in the world to quickly and rapidly adopt Bitcoin. Let's give you some examples, a classic example you can look up is the Islamic Bank of Bitcoin. Islamic Bank of Bitcoin was created to enable the use of Bitcoin within the Sharia law finance system. And under Sharia law, interest payments are considered usury or usury, I'm not sure how to pronounce that, but you know what I mean. It's exploitation to charge interest. It's forbidden in the Quran. So banks in the Islamic world do not charge interest. What they do instead--and this is a bit kind of a semantic thing--but they enter into joint ventures with companies that they're offering loans to and then they collect dividends back. And those dividends have a specific dividend schedule which might be, say, a 3%-every-year dividend.

Smells like interest, walks like interests. But the important thing is that there are certain rules and regulations is how to use currency in an Islamic system. And that's not the only culture out there that has its own particular perspective on how money should be used. I worked for many years in New York and a good number of my colleagues were Orthodox Jewish and they observe the Sabbath.

So I knew very well there were not going to be any conference calls on a Saturday because they don't use electronic and electrical equipment on the Sabbath. Can Bitcoin be adopted today in a culture where the Sabbath is followed religiously? That may have been an unintended pun. Can it be adopted in that environment? Only if you have a means of exchange that doesn't depend on electricity. And we need to think about that. And if the Sabbath is a bit of a problem, think about Sub-Saharan Africa, where you don't have electricity, where not having electricity is the norm. If the lights went out right now, everyone would get up and head for the exits. I was doing a presentation in Bangalore, I was on stage, the lights went out, the fire alarm started ringing, no one got up.

I was ready to organize a massive evacuation. They knew that this was just Tuesday because that's what happens in Bangalore, power goes out at Tuesday. And it's a perfectly normal thing. So in some cultures, you have expectations, we have expectations.

In this culture, we assume that our money will have a certain value that it will be the world reserve that we can do interbank transfers. And these assumptions are very, very rare. Neutrality in Bitcoin means being able to address the rest of the world because at the end of the day it's not about us, it's about the other six billion. So can we create a currency that is neutral towards religion and can be readily adopted in any religious system? Can we create a currency that is neutral to our geography towards language and even towards connectivity whether you have it or not, electricity whether you have it or not? So these are the core concepts that leads to greater adoption, but there are also the things that spur innovation because if you make it easily easy for people to adopt the currency and they look at the currency and see it as a neutral technocratic scientifically based currency, it doesn't offend their religion, it doesn't offend their culture, it's not contradictory to their values, it is compatible with their language. They can readily adopt it. Now why do I care about ready adoption of Bitcoin in other countries?

Because that's where it's going to happen. We get caught up in understanding Bitcoin in reference to our currency which is the US dollar here and in most of Western Europe two currencies that are relatively stable.

So if you had a hierarchy of currency, here's the U.S. dollar, the world's reserve currency, relatively stable over decades or even longer, right, and here's the Zimbabwe dollar. I have a beautiful picture in the presentation which shows a Zimbabwe 100-trillion-dollar bill. And you can go online and search and see people buying coffee with a stack of money this tall. So if you're American and you ask yourself, is Bitcoin better than the dollar? 99% of people are going to answer no. If you're Zimbabwean and you ask, is Bitcoin better than the Zimbabwe dollar?

Goat poo is better than the Zimbabwe dollar as a trading mechanism, as a transaction, even as a store value. At least you can burn it and make fire, right. So we really have to understand that there's a completely different level of comparison in within our context and within the global context. So if you think of that hierarchy of currencies, where does Bitcoin fall? Probably, in terms of utility, it's better than 20 currencies in the world right now, maybe 30 currencies in the world. It's bigger than about 15 world economies, country economies already at 1.7 billion.

And it's better than a lot of world currencies--currencies that are crazy volatile. You think Bitcoin is volatile? Not even close. Most of Sub-Saharan Africa would love to have the stability of Bitcoin. So we need to understand that the comparison is different. Now why is this topic really important? Because I see adoption happening in the form of punctuated equilibrium. We assume the Bitcoin is going to gradually get broader and broader and broader and broader over time until eventually its top holds various currencies and becomes the world currency. That's not how it's going to happen. Instead, what you're going to see is a crisis, perhaps something like Cyprus. And you're going to see a massive conversion in a very limited geography, whole countries, whole cities converting. What are the requirements to massively convert to Bitcoin?

There are four fundamental requirements. The first one is relative utility or relative value. Is Bitcoin better than the piece of paper my government makes? And the answer for the U.S. will be, "Yes, last." It's the last currency where you can say that thing is, "Yes, Bitcoin will be better." But every other currency is going to happen first, right. So utility is it better than what I currently have in my pocket. Two, will I get jailed or shot for holding Bitcoin? We don't think about that. There are plenty of countries in the world, where if you do not have the currency you are smuggler.

And there is no due process, right. So you get a shot for holding Bitcoin. That's a bit of an impediment. We don't need to worry about that. You know, someone issues a suspicious activity report on us at least we can argue about it. There's no suspicious activity report in Zimbabwe, they shoot you, right, or maybe not Zimbabwe or maybe some other country. These things happen. So can you safely hold Bitcoin? Is it worth more than the currency you currently have in your pocket? Do you have the technology within your country to adopt it? That's very critical, right.

We all have smartphones, we have Internet connectivity, we have always-on Internet connectivity--that is not the case. So I don't expect Bitcoin to be adopted in Zimbabwe not because it's not more valuable but simply because they don't have the means to be on the blockchain, even occasionally or even be with electricity occasionally in order to take advantage of Bitcoin at that level. So utility or value, fear or lack of fear, in the adoption of the currency and technology, do you have the necessary technology?

And the fourth one is neutrality. Can I adopt that currency without violating some expectations of my cultures and cultural norms and religious norms, does it work with my language etcetera, etcetera. Now we all focus on the features of Bitcoin making it easy to use. That's really important. But we have to think of these barriers because what they do is they provide that sweet spot where all of these three things converge, all these four things converge, and suddenly Bitcoin is a much better choice.

And when you reach tipping points in technology, what happens is massive viral adoption. We've seen this with currencies like in paisa, which is essentially a transactional currency based on cell phone minutes. Was it built as a transactional currency based on cell phone minutes? No. It was for carriers to be able to sell cell phone minutes and people to move them between their family. But it's convenient. It maintains its volume better than many currencies in Sub-Saharan Africa.

So it became rapidly adopted because you could use it with simple non smart cell phones. Can we create the necessary conditions within Bitcoin so that when people are willing, unafraid, able through technology, Bitcoin is the natural neutral global choice that they can put their trust in? And if we create those conditions, then we can address the real potential of Bitcoin. So let's look at what the real potential of Bitcoin is within that scenario. Anybody want to hazard a guess as to how many people in the U.S. do not have a bank account?

Unidentified Male: 60 million.

Andreas M. Antonopoulos: 60 million, yep. It's somewhere between 15 and 20% depending on how it's count is the fully unbanked population of this country. That's an enormous number. Now do you think that's because these people don't have money? No. Usually, there's 10 other reasons why people are unbanked. It has to do with regulatory issues, right. They don't have sufficient proof of identity. They don't have legal status in this country. They don't have enough documentation.

They don't have enough money or enough cash flow through that bank account to make it worthwhile. And so you have this completely parallel banking system, which in the U.S. consists of payday loans, short-term loans, and various other--very exploitative vulture-like capitalism systems that exploit the poor. If you grasp for a moment that in the U.S. 60 million people live under that banking regime, make the leap and realize six and a half billion people elsewhere have never known anything but that regime.

And that's where Bitcoin wins. It's not about us because the relative utility of Bitcoin to someone who's already banked who has a stable reserve currency is relatively small. But once you start thinking about the great unbanked masses, the question is: how do we make it possible for them to adopt Bitcoin as quickly as possible? What are the preconditions? Let me suggest some of the answers.

One, we need to be able to make Bitcoin usable without constant access to the blockchain. This is already possible in a number of ways. You can do islands of Bitcoin that enable transactional Bitcoin within that island and occasionally sync back only the inflows and outflows into the blockchain. This is already happening. When you go on Mt. Gox and you buy Bitcoin and you sell Bitcoin, and you buy Bitcoin and you sell Bitcoin, you buy Bitcoin, do you think they actually have that Bitcoin? Possibly, but they really only accounts for the Bitcoin you withdraw, right. Only that hits the blockchain. The rest of it is completely off blockchain transactions.

So can we do that on a more systematic basis for those countries and those environments where you don't have always-on connections where you can transfer seven gigabytes over your Internet connection in less than six months? And where if you start the download, the problem isn't that your connection will flicker out; the problem is that your city will flicker out as it does every afternoon at 2:00 PM because everyone turned on the air-conditioning.

This is a fact of life throughout the world. Can we use Bitcoin in a non-electricity environment even without cell phones? Yes, we can. We can imbed the value of Bitcoin in paper wallets. And if those paper wallets are made tamper proof and are used as a means of exchange, the paper wallets acquire face value that is related to the underlying value of Bitcoin. Essentially, Bitcoin becomes the reserve currency of these paper wallets. So you can actually build a full paper system of currency that is backed not by gold, not by floating exchange rates, but actually backed by proof of stake in Bitcoin and enables you then to trade these bits of paper at a premium over face value.

Who here has cassation coins? Anyone? Yeah? Did you pay face value for them or did you pay a premium? You paid a premium. They're worth more than the Bitcoin that's on them because they're pretty shiny objects. And even more so now that Mike has stopped selling the coins to the public. They're pretty shiny objects you can't buy anywhere except on eBay, right.

Supply goes down, price goes up. And so by creating artificial scarcity through proof of stake of Bitcoin, you can make paper currencies that can be exchanged at a premium over face value and work as a perfectly usable currency with a couple of really interesting exceptions. I can't make backups of my money.

I can make backups of paper wallets, right. No one can inflate my paper wallet money like they can fiat money, right. So you can do a lot of interesting things with this while still maintaining the basic transactional capability. We need to start thinking about using Bitcoin without electricity, using Bitcoin over SMS, using Bitcoin by exchanging short phrases that are codes that unlock Bitcoin wallets by reference. And so that kind of thinking leads us to create the exact right conditions so that when a country suffers a currency crisis, the answer is not to put all of grandpa's money in a suitcase and head for the nearest border. You see my name? It's long and unpronounceable. It's Greek.

I know all about suitcases of money leaving a border. My parents spent nine months standing in line at a bank, transferring the maximum 10,000 euros a day, every single day, with 5000 other people standing in line to do the same thing. It's a -- can you imagine a bank run, a run on the banks that last nine months like slow-motion? You saw this down, but we're sure we're not leaving our money with you. We're going to take it out slowly.

Sure, fine. So you have every single family having Nico's standing in line in the morning, Maria switches in the afternoon until Kostas manages to get into the bank, grab the 10,000 and wire it out of the country. I now run an investment fund, which is my parents' retirement. I didn't want to do that, but we're not keeping it in Euros in Greece. People are accustomed to conditions of extreme difficulty in the world.

And if we think about Bitcoin in the terms of a first-world country, we're missing this tremendous opportunity that exists around the world to elevate the other six and a half billion--the great unbanked masses. And to them, this is a very compelling proposition because they're comfortable with extreme volatility, they're comfortable with suitcases of money crossing the border, they're comfortable with law that applies according to what the police person said and how much you bribe them.

We're getting comfortable with that concept, too. But for most countries, that's the reality. So in summary, neutrality, which is an underlying principle here, is one of the four necessary conditions that are required in order to see worldwide rapid bursts the adoption of the currency.

It's not about whether Bitcoin will be adopted, or where it will be adopted, or when it will be adopted. The only question is, will we be ready as the Bitcoin community for the influx of millions of people for the use of Bitcoin in new scenarios at completely different transactional rates? If you were here a couple of days ago, the GigaOM session, a gentleman from India stood up and said "Hey, I like your 0.001 transaction fee, but your micro transaction is sending a dollar. My micro transaction is sending 10 rupees."

That's point one of a cent, right, whole different perspective. Our micro transaction is a transaction in India. Their micro transaction doesn't have a word. So we need to start thinking of scaling from femto transaction to giga transaction and a whole different concept of what pocket change means.

We need to be able to develop technology around Bitcoin that enables electricity less, communication less transfer value. And finally, we need to make sure that as we go forward--and very many forces that are not supporting Bitcoin because it's not in their interest--as they try to pervert the core neutrality in the protocol, we work hard to preserve those principles.

So anytime you see a change that is suggested in the Bitcoin code, in the Bitcoin protocol, in the Bitcoin payment systems, ask yourself this: how does this change affect the core principle of neutrality? How do we make sure the neutrality as a principle is adopted so broadly that it can't easily be attacked? In 1992, the Internet had its AOL moment. Those of us who were on the Internet before call that Black Monday.

It was the day that AOL dumped 11 million noobs onto the Internet. And, of course, everyone who was already on the Internet was absolutely horrified because noobs didn't know about spam, they didn't know about netiquette, and they didn't -- well, you know how it goes. But that was an inevitable situation. It was an absolutely necessary thing in order to get the Internet to mainstream. What we managed to do on the Internet was maintain the principle of neutrality long enough that it got as broadly distributed as it is today.

And now neutrality is baked into the system to a level where even if it's attacked, the attacks fail. And why do they fail? Because when you compare the value of a decentralized system for the value of a centralized system, the decentralized system always wins. It always delivers better value and better efficiency to everyone, right. Centralized systems only benefit those who are at the center. If we take the Internet and make it broad neutral, as we did, great.

By the time the carrier's try to make it un-neutral, by the time they try to buy priority access on the Internet, it was too late because it's distributed broadly enough that the end points resist centralization. Who are the endpoints? We are, right. We resist centralization.

And we resist centralization whether we know it or not because we see the value of neutrality as expressed through the ability to blog as loudly as CBS, to share our opinion and create grassroots revolutions on Facebook, right. Those principles of neutrality translate into power and we're not about to let go of that power even if we don't know how it relates to neutrality. Bitcoin is neutral today.

It will be neutral for as long as we fight to keep Bitcoin neutral as long as we resist attempts at centralization and co-option. If you see people trying to make sure that transactions on Bitcoin can be prioritized in a way, not per the size of the transaction, but based on who the sender is, or who the recipient is, scream, because that violates the principle of neutrality and that principle of neutrality is the most important and valuable characteristic of Bitcoin. So to wrap up, neutrality will lead to adoption. It's one of the four preconditions to adoption.

We need to address the other three. We need to make sure that we can easily demonstrate the value of Bitcoin over national currencies, where that value is clearly identifiable.

We need to make sure that the Bitcoin can be accepted because it is able to work in an environment without electricity, without communications, etcetera. We need to make sure that people can use Bitcoin without getting jailed or shot. One of the great ways to do that: support Bitcoin charities beyond enterprise; really, really cherish the gift economy we've created with Bitcoin and support Bitcoin charities.

When the legislature runs out against the campaign that says if you kill Bitcoin these kids starve, this puppy goes to a kill shelter, and this bear in China doesn't have a future and goes extinct, that's a much better message than Bob the Speculator won't make enough money. Invest in charities because that enhances the concept of neutrality and makes it concrete.

Finally, when these changes happen and when you see this massive adoption, you're going to see again attempts to violate the neutrality and we need to resist those. Ask yourself, if a change is happening, does it give me enough utility to be worth giving up this principle of neutrality? With that I'd like to open for questions. We're going to set up a microphone here. I'm going to turn off this microphone and sit down. Give us just 10 seconds and we'll start taking questions. Thanks.

Unidentified Male: I understand the abstract, the threat to neutrality. And I understand the specific case you cited of perhaps prioritizing transactions based on what I would call their sources address and destination address.

Andreas M. Antonopoulos: Yeah.

Unidentified Male: Can you say any more concrete things you can envision that would be -- I mean, I understand the general signs of attack. But are there any more concrete attacks?

Andreas M. Antonopoulos: Sure. One of them is centralization of control points. At the moment, Bitcoin as a network is flat. Every node is a node. Every node is a full node or can be if it needs to be.

Unidentified Male: Uh-huh.

Andreas M. Antonopoulos: We've seen in similar networks in the past the creation of tiered environments, especially on the Internet where effectively some nodes become super nodes. We see this in peer-to-peer and it's actually an effective mechanism because the super nodes run independently. It's not an effective mechanism if the super node is MAE-West or MAE-East, one of the main Internet carrier hotels.

Unidentified Male: Yes.

Andreas M. Antonopoulos: And out of one of those racks, a little piece of Fiber Snakes into room 101 that goes to the national storage agency. That centralization of control that is really dangerous, right. The key to remember is that at the moment we're on the cusp. The Internet can either be the greatest liberator in humanity or the worst Totalitarian Dystopia. And the only difference is how it plays out from now on. I think we're winning. I don't know.

Unidentified Male: I think so, too.

Andreas M. Antonopoulos: And I'm taking the Liberty side not that just in case you're wondering. But the point is that that this is not an easy battle and it's hard to see the signs because they make a lot of sense from a business perspective for certain players to centralized control.

Other areas where you can sense the danger is beginning to attach identities to Bitcoin, not on a voluntary basis, but creating barriers to payments based on whether your identity is true or not, whether it's tied to a government document or not. And if you start seeing regulations that attempt to do that Danger, Danger, Will Robinson, right. That's where it becomes very dangerous because if you force tying to identities then you can start blocking based on identity and it leads to the source destination filters.

Unidentified Male: Well--

Andreas M. Antonopoulos: Today you can invest your Bitcoin in promoting certain causes like WikiLeaks, for example, that you cannot do on the Visa Network. You can support the KKK on the Visa Network.

Unidentified Male: Yeah.

Andreas M. Antonopoulos: You can support WikiLeaks.

Unidentified Male: Yeah.

Andreas M. Antonopoulos: I have a problem with that. I don't have a voice to change that. On Bitcoin today, it doesn't matter who you are because you can use anonymity to protect yourself from essentially financial censorship and control pseudonymity. You can use that. We want to maintain that. That's an important principle of neutrality. Pseudonymity is an underlying principle of neutrality and it's very important.

Unidentified Male: Well, at the risk of your follow-up question here that's related to your point, I can clearly see threats regulation at the exchange points between fiat currencies and sovereignty and distributed * 00:33:21 currency like Bitcoin. Yet it's hard for me to see any real threats within the Bitcoin world. I can't imagine how a sovereign power could say to Gavin or the others, "You will prioritize our blocks or whatever made our connection to the block."

Andreas M. Antonopoulos: Uh-huh.

Unidentified Male: Do you see any real threat?

Andreas M. Antonopoulos: Yeah, I do.

Unidentified Male: Yeah.

Andreas M. Antonopoulos: Because one of the first things you would do is you start filtering the underlying traffic of the peer-to-peer Bitcoin network and you'd start basically dropping transactions as they try to cross the border. And we're going to see that. Bitcoin will not be able to flow freely. I can guarantee you that countries will block Bitcoin.

They block everything else. Of course, they're going to block Bitcoin. And it will take them some time to realize that that's to their own detriment. But just like we see censorship on the Internet and the Great Firewall of China and the Great Firewall of Iran and many great firewalls, those firewalls will come to stop Bitcoin.

Unidentified Male: But HTTPS tunneling has managed to solve a lot of those problems.

Andreas M. Antonopoulos: And then you need international proxies. Yes, it's a running battle which we will win.

Unidentified Male: Yes. I sure hope so.

Andreas M. Antonopoulos: But that doesn't mean it doesn't have to be fought or that a lot of people are not going to lose their freedom while they're fighting this battle. So, yes, absolutely, that's exactly the type of principle you have to protect. There are many attack points against Bitcoin.

You can spam it with transactions if you're a government. You can flood wallets if you're a government. You can start blocking the connections to the rest of the blockchain or you can start spoofing the connections to the rest of the blockchain.

Unidentified Male: Yes.

Andreas M. Antonopoulos: And certainly you can monitor at all. As you mentioned, as I mentioned before, one of the areas of adoption or one of the criteria for adoption is, do people get killed for owning Bitcoin?

Unidentified Male: Yes.

Andreas M. Antonopoulos: Here, no. In some countries, yes. And so if you combine the threat of deadly force with the ability to monitor and intercept Bitcoin messages, that's a very powerful deterrent to adoption. And it will start affecting the neutrality of the underlying system. I think, are we out of time?